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The Organization of R&D in American Corporations: The Determinants and Consequences of Decentralization

Ashish Arora (), Sharon Belenzon and Luis A. Rios

No 17013, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the relationship between decentralization of R&D, innovation and firm performance using a novel dataset on the organizational structure of 1,290 American publicly-listed corporations, 2,615 of their affiliate firms, as well as characteristics of 594,903 patents that they hold. We explore the tension between centralization and decentralization of R&D, which trades off between responsiveness to immediate and local business needs and the type of research that can benefit the firm as a whole. To do this, we develop two novel measures of decentralization. First, using intra-firm patent assignments, we distinguish between patents that are assigned to the inventing unit rather than to corporate headquarters. Second, we exploit the variation between firms which posses a central corporate R&D labs and those that do not. We find that centralized R&D tends be more scientific, broader in scope, and have more technical impact, while being more likely in firms that operate within a narrower range of businesses, in complex technologies, or that are less reliant upon acquisitions. Additionally, we find that firms with a more decentralized structure, on average, invest less in R&D, generate fewer patents per R&D, and exhibit greater sales growth and higher market value. We discuss several theories that can explain these relationships, as well as potential avenues for future research.

JEL-codes: D23 D83 L22 O32 (search for similar items in EconPapers)
Date: 2011-05
New Economics Papers: this item is included in nep-ino, nep-ipr, nep-pr~, nep-mic, nep-ppm and nep-tid
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